[Draft, August 30, 2012]

Transcription

1 THE CRISIS OF AFRICAN AMERICAN UNEMPLOYMENT REQUIRES FEDERAL INTERVENTION [Draft, August 30, 2012] Algernon Austin Director, Program on Race, Ethnicity, and the Economy Economic Policy Institute 1333 H Street NW Suite 300, East Tower Washington D.C., aaustin@epi.org Submission for Fourth World Conference on Remedies to Racial and Ethnic Inequality, Minneapolis, MN, October 11 13, 2012.

2 The problem of joblessness is a deep and persistent one for African Americans. Since as early as 1960, the black unemployment rate has been about twice the white rate. What policies can be pursued to eliminate this disparity and achieve full employment for black workers? Given the inability of the normal workings of the private sector to solve this problem over the last five decades, only strong action by the federal government will be able to address it. On occasions of deep economic downturns, the federal government has engaged in job creation. Most recently, in response to the Great Recession, the federal government has actively worked to create jobs. The persistent plight of high unemployment in many of America s communities should be seen as a crisis as serious as the episodic deep national recessions. The federal government should support the following in high unemployment communities: (1) the direct creation of public sector jobs, (2) sectoral job training programs that are coupled with strong job placement programs, and (3) wage subsidies for hiring the unemployed. These three policies in combination should bring large numbers of jobs to blacks who are disproportionately likely to reside in high unemployment areas. The Crisis of African American Unemployment Figure A shows the annual unemployment rates for African Americans and whites from 1960 to Data for African Americans is not available prior to The highest white unemployment rate over this 52 year period is 8.3 percent in Of the 40 years for which we have data for blacks, only three years were at 8.3 percent or below. In 2007, the black unemployment rate was 8.3 percent. In 1999, it was 8.0 percent. In 2000, it was 7.6 percent. The worst unemployment rates that whites have experienced are comparable to the best unemployment rates blacks have experienced. Unemployment rates exceeding 8.0 percent would be considered a sign for extreme economic distress for whites or for the nation as a whole. With regard to unemployment, it is fair to describe what black America has experienced for the past 40 years as ranging from very bad to abysmal. Not once in the past 40 years have there been sufficient jobs for blacks. Not once in the past 40 years has black America experienced what could be defined as full employment. If we define full employment as being a rate of unemployment no higher than 4.0 percent, 1 then white America has experienced full employment in the late 1960s, the late 1990s and early 2000s, and the mid 2000s. It also came close to full employment in the late 1980s. Thus, the American economy fairly regularly produces full employment for whites, but it has never, in the past 40 years, come anywhere close to providing full employment for blacks. 1 There is debate over what is an appropriate floor for unemployment. My full employment rate comes from Bernstein and Baker (2003, p. 13). See their discussion of NAIRU for why many economists might consider this rate too low. In my experience with grassroots activists, they find this rate too high. 2

3 Figure B shows the black white unemployment rate ratio for 1972 to 2011 from Current Population Survey estimates. The ratio is generally between 2.0 and 2.5, meaning that over the past 40 years the black unemployment rate has tended to be 2 to 2.5 times the white rate. Although we do not have Current Population Survey data the source for official unemployment rates 2 prior to 1972 for blacks, Census data can provide a rough picture. In both 1960 and 1970, Census data suggest that the black unemployment rate was about twice the white rate. 3 The problem of great disparities in black and white unemployment therefore goes back at least to The well publicized U.S. Bureau of Labor Statistics monthly unemployment rate comes from this survey. 3 It was 1.7 times in both years. Census data provides lower unemployment rates and ratios than Current Population Survey data. It is therefore likely that the comparable Current Population Survey ratio would be higher. 3

4 Employment that reaches deep into African American communities is key to the economic health and progress of black America. We cannot lower black poverty rates and all of the problems that stem from high poverty without greatly improving blacks access to jobs, and especially jobs that pay a good wage. High unemployment also plays a role in black educational outcomes. If it were possible to obtain and sustain full employment for blacks, we would expect substantial increases in the performance of black students. 4 Economic conditions also seem to be related to crime rates. Although there is much that criminologists still do not understand about the dynamics of criminal offending, a growing body of research suggests that low wages, high unemployment, high poverty, and high economic inequality lead to higher crime rates (Kelly 2000; Ludwig, Duncan, and Hirschfield 2001; Gould, Weinberg, and Mustard 2002; Machin and Meghir 2004; Lin 2008). 5 Strong job creation that targets African American communities would improve economic conditions in these communities and likely reduce crime rates. It 4 The unemployment of a parent or guardian directly leads to negative outcomes for children (Stevens and Schaller 2009; Kalil 2010). It has indirect effects by increasing the likelihood that a child will experience poverty and other types of economic hardship. These hardships also produce negative educational outcomes (Duncan and Magnuson 2005; Kalil 2010; Lee and Burkam 2002; Stevens and Schaller 2009; Taylor, Dearing, and McCartney 2004). 5 It is important to recognize that economic conditions are not the only factors driving crime rates. Demographic changes, criminal organization practices, criminal justice policies, and other factors all affect crime rates. The recent declines in crime likely stem from these other factors. 4

5 is hard to think of a major social problem facing African Americans that is not caused or worsened by the persistently high unemployment faced by blacks. Black social and economic progress will continue to be limited until American society creates an economy that can provide full employment to blacks. Popular Explanations for Black Difficulties in the Labor Market There are several hypotheses for why African Americans may face difficulties finding work. Three of popular ones are (1) that blacks lack the proper education and skills, (2) that there is a spatial mismatch between where blacks reside and where the jobs are, and (3) that blacks possess a culture of poverty that prevents them from obtaining work. These positions would lead to different policies or different emphases than what I propose, therefore it is worth exploring their merits. Education and Skills By any measure, the African American population is much better educated today than it was in the 1960s or the 1970s (Austin 2006, 41 49). For example, in the 1973, black high school seniors scored 40 points lower on the National Assessment of Educational Progress mathematics test than white seniors. In 2008, black seniors scored 26 points lower (National Center for Education Statistics n.d.). In 1970, only 6.1 percent of black adults had a bachelor s degree. In 2011, 20.2 percent did (National Center for Education Statistics 2011). Although blacks have made significant educational advances, the black white unemployment rate ratio has not showed any significant decline. It is true that in spite of advances, blacks continue to lag behind whites educationally. But even if black were able to close all gaps with whites educationally, there is reason to be doubtful that the unemployment disparities would disappear. African Americans are more likely to be unemployed than whites at every educational level. In 2007, for example, before any significant unemployment effects of the Great Recession had been felt, blacks 25 years old and older with a high school diploma were about twice as likely to be unemployed as their white peers. Blacks with a bachelor s degree or higher were one and a half times as likely to be unemployed as their white counterparts. These disparities are so large that even if blacks had the same educational attainment profile as whites, most of the unemployment gap would remain. The limitations of remedies that target hard and soft skills A related but somewhat different issue is skills training. As with education, it is doubtful that skills training alone is a powerful enough remedy to rectify the employment disparities between blacks and whites. An evaluation by Public/Private Ventures, a nonprofit research organization, provides an illustration (Maguire et al. 2010). The study evaluates the sectoral employment approach, which provides job seekers with training in the technical ( hard ) skills needed for specific growing sectors of a local economy. The organizations providing the training work closely with employers to ensure that training is relevant. In addition to technical skills, programs also provide some interpersonal ( soft ) skills training. 5

6 Public/Private Ventures used a rigorous experimental design to assess the effectiveness of the sectoral approach. A year after participants started the program, there were positive employment effects for women, the foreign born, and Latinos. In contrast, the program was not successful in improving the employment rate of African Americans. Although the skills of the African American participants improved, their employment rates did not. This study raises doubts that training is enough to improve black employment rates. Some scholars believe that employers reject African Americans, particularly African American men, because African Americans lack soft skills (see Hamilton, Austin, and Darity 2011, 6 7). The occupational and employment data do not support this view, however (see Allegretto and Pitts 2010, Appendix A; Hamilton, Austin, and Darity 2011, 6 7). African Americans, including men, are overrepresented in the service sector, a sector with relatively high soft skills demands. They are very much underrepresented in the construction industry and slightly underrepresented in the manufacturing industry, both of which emphasize hard skills. The greater labor market challenge for blacks is gaining access hard skills dominant occupations, not soft skills ones. A Spatial Mismatch or a Racial One? Another popular idea is that the unemployment disparity is significantly due to a spatial mismatch between African Americans and jobs. The idea is that African Americans live in urban areas but jobs and much of job growth is in suburban areas (see Hellerstein and Neumark 2011). Thus, one would expect that the suburbanization of the black population would lead to a reduction in the black white unemployment rate ratio. This has not happened. In 1960 only 13 percent of the African American population lived in suburbs. By 2000, 35 percent did so (author s calculations based on data from Wiese 2004 and Ruggles et al. 2010). In the 100 largest metropolitan areas, which are home to about three quarters of the African American population, 51 percent of African Americans lived in suburbs in 2010 (Frey 2011). These increases in suburbanization have not been accompanied by a reduction in the unemployment ratio between African Americans and whites. Even in metropolitan areas where only a small share of the black population resides in the central city, large unemployment disparities persist. In Washington, D.C., for example, only 21 percent of blacks in the metropolitan area lived in the central city in 2000, but unemployment was 3.5 times higher among blacks as whites. In Atlanta only 18 percent of blacks lived in the central city in 2000, but the rate of unemployment among blacks was 2.6 times that of whites. 6 Suburbanization has not reduced the disparities in unemployment. Racial Discrimination or a Culture of Poverty? 6 Data on the share of blacks residing in the central city are from Turner (2008). Unemployment rate ratios are derived from Economic Policy Institute estimates based on Current Population Survey and Local Area Unemployment Survey data from the Bureau of Labor Statistics. 6

7 The idea that black disadvantage stems from a culture of poverty i.e., a lack of effort, poor moral character, or slack work skills among blacks who are poor is a popular one (Wilson 2009, pp ). Scholars sometimes use the success of the black middle class and black immigrants to assert that it is not racial discrimination that holds blacks who are poor back, but bad cultural traits. It is true that the Civil Rights Movement increased opportunities for blacks and led to the growth of the black middle class. However, it is clear that the black middle class has a more disadvantaged and precarious existence than the white middle class. Specifically regarding employment, blacks with a bachelor s or higher degree tend to have unemployment rates about 1.6 times whites with the same level of education. 7 Thus, blacks who stayed in school, worked hard and completed a college degree still face a significantly worse labor market than similar whites. While on some socioeconomic measures black immigrants may have more positive scores than U.S. born blacks, there is evidence that black immigrants are also disadvantaged in the American labor market. To best see these disadvantages, one needs to compare black immigrants to white immigrants and to U.S. born whites. In these comparisons, the disadvantage of blackness becomes clear. For example, in 2011, the unemployment rate for U.S. born non Hispanic whites was 7.2 percent. For foreign born non Hispanic whites, it was 7.6 percent. For foreign born non Hispanic blacks, it was 12.5 percent (Bureau of Labor Statistics 2012), much higher than for the U.S. born and foreign born white populations. It is also important to note that foreign born blacks have a higher unemployment rate than foreign born Hispanics and foreign born Asians also. Among the U.S. born populations, blacks have the highest unemployment rate, and among the foreign born populations, blacks again have the highest unemployment rate (Bureau of Labor Statistics 2012). For blacks, cultural background appears to matter less than race. Audit studies and the case for discrimination Blacks who should not have a culture of poverty college educated blacks and black immigrants also have significantly higher unemployment rates than whites. This suggests that anti black bias in the labor market is an important factor behind high black unemployment. The empirical evidence for anti black discrimination in the labor market has continued to strengthen overtime. Repeatedly audit or paired tester studies have shown that when black and white applicants apply for jobs with the same qualifications, employers express a preference for white applicants (Pager, 2003; Pager, Western, and Bonikowski 2009; ROC NY et al., 2009). This anti black bias is also present when researchers only send out résumés with black sounding names like Lakisha (Bertrand and Mullainathan, 2004; Morris, Sumner, and Borja 2008). Qualitative interviews of employers (Park 1999; Moss and Tilly 2001; Shih 2002) and implicit attitudes research by social psychologists (Nosek, Banaji, 7 Author s analysis of Current Population Survey data from the Bureau of Labor Statistics from 2000 to 2011 for the 25 years and older labor force. 7

8 and Greenwald 2002) also support the view that anti black bias is common in American society and that it would present a significant hindrance to blacks seeking work. Conclusion While it is possible that education and skills, a spatial mismatch, and a culture of poverty play some role in high black unemployment rates, these explanations leave out the significant factor of anti black discrimination in the labor market. Blacks have improved their educational attainment and achievement significantly since the 1970s, yet the black white unemployment rate ratio has not fallen below 2. We should therefore be highly skeptical that education will solve this problem. Blacks have also become more suburban since the 1970s, but suburbanization has not reduced the unemployment rate ratio. This fact raises serious questions about space based solutions. While the culture of poverty argument is a popular one, it does not explain why blacks who clearly lack a culture of poverty also do poorly in terms of unemployment. A more convincing explanation for why highly educated blacks, suburban blacks, and black immigrants do worse than their white peers is the persistence of anti black discrimination in the labor market. Throughout American history, major advances against anti black discrimination have required intervention by the federal government. A Plan for Creating Jobs in High Unemployment Areas The depth and the persistence of the African American jobs crisis can probably be solved only with intervention by the federal government. In the past 50 years, the normal working of the U.S. economy and the modest amelioration efforts that have been tried have failed to provide sufficient jobs for African Americans. Increases in educational achievement and suburbanization by blacks have also failed to spur change. If a bold new approach to the problem is not taken, it is likely that blacks will be condemned to unemployment rates that are twice those of whites into the foreseeable future. On more than one occasion, the United States has responded to crises of joblessness with government intervention. The federal government intervened during the Great Depression, the recessions of the early 1970s, and the Great Recession. A sustained level of high unemployment for African Americans decade after decade should be recognized as a crisis as serious as periodic deep national recessions. White Americans regularly experience unemployment rates below 6 percent a rate that blacks have never experienced in the past 40 years. An unemployment rate of more than 10 percent would be considered extremely high for whites but African Americans have had to endure unemployment rates of more than 10 percent for most of the past 40 years. Given the intractability of high joblessness for African Americans, the federal government should support targeted job creation for communities experiencing persistently high unemployment. Job creation should be targeted to communities of 25,000 people or more in counties and metropolitan areas that have experienced unemployment of more than 6 percent every year in the previous 10 years. Eligible individuals must have resided in an eligible community for a prolonged period and have been 8

9 unemployed or out of the labor market for at least six months. The program could be phased out in communities over a five year period after the annual unemployment rate fell below 6 percent. Types of programs The federal government should support three separate programs for increasing employment in these high unemployment areas: direct public sector employment, job training with job placement, and wage subsidies for employers who hire unemployed workers. Together these policies should significantly increase employment rates in African American communities with persistently high unemployment. Direct public sector employment. The federal government should provide funds to local governments for job creation aimed at improving the quality of life in the community. Local governments, with community input, should create projects to improve the human and physical infrastructure, safety, health, and attractiveness of the community. Many African American communities experiencing persistently high unemployment need workers to clean, rehabilitate, and beautify the housing stock and green spaces; assist in the education of children; form auxiliaries to the police to help improve the safety of the community; and participate in many other community projects. These jobs would improve the quality of life of existing residents and make the community more desirable to middle class households. Unemployed community residents would be hired and trained to perform all program jobs with the possible exception of supervision and training. Job training and job placement. Black job applicants have a lower likelihood of being hired than equally qualified whites or Latinos (Pager, Western, and Bonikowski 2009; Morris, Sumner, and Borja 2008). Improving the skills of black workers is useful, but it may not be enough to lead to employment. Organizations providing training for black workers also need to provide services to help place those workers in jobs. These organizations need to develop strong relationships with employers and aggressively market qualified black job candidates. They also need to develop other strategies to help well trained black workers find employment. For profit and nonprofit organizations should be eligible for funds for training residents of targeted communities in skills that are in high demand in the local economy and placing them in jobs. Programs should be assessed by the employment rate of their graduates six months after completing the training program. Programs that underperform should lose significant amounts of funding each year, with the freed up funds redistributed among well performing programs. Wage subsidies. Private sector employers who hire residents from targeted communities in new jobs should receive a wage subsidy of 75 percent of the hourly minimum wage for each full time worker receiving benefits hired and 33 percent of the hourly minimum wage for each part time worker or fulltime worker not receiving benefits hired. Employers located within the targeted community should receive an additional subsidy that is 10 percentage points higher. Long term effects of a jobs program in high unemployment areas 9

10 The effects of the proposed program are likely to be felt for several years after it is phased out. Researchers find that positive economic effects last for many years after temporary jobs programs end (Bartik 2001: ). Positive experiences with African American workers may also reduce employer biases, possibly leading them to institutionalize the outreach and hiring of African American workers (Bartik 2001, ). Studies of public sector employment programs find that employers are surprised to find that workers from disadvantaged groups can perform as well as the workers they usually hire (Bartik 2001, ). This jobs proposal is designed to increase the overall economic resources in the community. Increasing the number of working and taxpaying individuals would increase the tax base for additional economic development activities while also decreasing local government social service and social welfare costs. It would make the community more appealing for locating a business. The proposal is also designed to increase the attractiveness of the community to middle class households looking for a new place to live as well as to both new and existing businesses. Significant growth in employment rates could also lead to increases in the educational achievement of the children in the community and reductions in crime. These improvements would attract more middle class residents and further increase the economic resources of the community. Conclusion The U.S. economy should be one in which everyone who wants to work can find a job. This has not been the case for African Americans for the last half century, though white Americans fairly regularly achieve full employment. Given the persistence of high African American unemployment despite improvements in their educational attainment and their greater suburbanization, a major national effort is needed to address the problem. Under the proposed plan, the federal government would significantly increase the number of jobs available to African Americans by creating public sector jobs, training and helping place participants in jobs, and subsidizing wages. By substantially increasing black employment rates, these policies would help diminish poverty, improve educational achievement, and reduce crime rates. 10

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